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;:\: x_~ .i,J(,~ Korea Economic :.ii6f! -~•}'\~,,;i'r.,~-6~., 'W j' 'C.'Jh' - .•&:, ,: -,•• ,, .. ;_,/,: •. .'\~',, .. , •\I' :>,· e,.o ..-.;,1 :, - ..._, .. _,, - ;,;·,·. ,,, - Institute of America ~,:.\.~i;rf•'tl•,,--,. 0.--;,., ;)?,,::,;;ei ¼<<-; ·-.1t-:;. ·:;.·t,',,-,f < --'~ - ~-,,_='...','· ~~~•}x~I ~~ < c.. ------~------..YKEI MiC INSTITUTE:: KOREA [:;COf'>l~-er DI ~- :s11 _<::! .:;i. _s_ ACADEMIC PAPER SERIES OF AMERICA ~ _
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KOREAN FIRMS' SUSTAINABILITY PRACTICES AND THEIR ROLE IN THE GREEN ECONOMY By You nsu ng Kim
Abstract Introduction Companies in industrialized nations have embraced The ultimate purpose of a business is to create wealth and environ.mental protection and sustainability as part of their to maximize shareholder returns.' Governments then set an international competitive strategies. The trend toward proactive adequate regulatory framework to ensure profit-maximizing environm.ental ma_nage_ment has a_lso g'rown in Ko_rean_ firms, firms' behaviors are aligned with overarching societal goals.' as consurners, investors, local policy networks, and t_he Lee However, un_like traditional profit-driven firms, some firms Myung-bak administrati11n's green growth policy initiatives have have begun to embrace a wider responsibility for social and provided an impetus for the greening of South Korean firms. environmental issues, voluntarily addressing sustainability However, despite heightened firm interest in environmental thaUenges. For instance, with respect to a fi_rm's operation responsibility, there is little understanding of which types cif based environmental impact, some firms adopt environ_m~ntal sustainable activities Korean firms have implemented. Analyzing management systems (EMS) that come at a cost in order to lower sustainability reports frorn 30 large Korean firms, thi_s study their environmental impacts.' Dt_her firms focusing on managing finds that Korean firms are more likely to ernploy lower-order carbon ernission_s undertake a carbon audit; set internal c_limate sustainability practices that can help prevent pollution and modify change targets, enhance energy efficiency, or purchase carbon existing processes and products to reduce e_nvir<'>nrnental impact. offsets. The number of firms taking such a proactive approach to Ht>\lfever, their focus on innQvating c_lean technologies seems to address envirQnmental and clim_ate challenges has increased in be l_imited. To transition to a low-ca_rbon, green economy, the industrialized nations over the past two decades. Korean government should consider green growth policies that Korean firms are also increasingly managing social and foster firms' investments in higher-order sustainability strategies environmental issues.' Prior to 1990, Korean firms did not and scale up corporate sustainability more broadly in the Korean consider environmental protection, objecting to strict regulations bu·siness community. to control industrial pollution. In the 1990s, due to environmental disasters such as phe_nol from an electronics company leaking i_nto Key Words: Korean firms, carporate sustainability, green a river, public concern over environmental threats intensified. growth, lower-order sustainability activities, higher-order Environmental issues soared to prominence on the political sustainability activities agenda. Expanded from the former Environmental Protection Agency founded in 1980, the Ministry of the Environment was created in 1990 and established many incentive-based, flexible policies including EMS. However, few Korean firms committed themselves to pollution prevention and sustainability. Since the mid-2000s, some large companies have seriously considered
· ·vounsu~ Kim_ is ~sOC:!ilte· Profe~r of EOVironme~tarSc1eiice and Polley in the·Schar School Of Policy·and Government · at George.Mason University. The views expressed are·solelyt'.hose of the aUthor and-do not necessariJy r~flect the views of any ol'ganization_s he Is a_ffi!i31:~
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Received by NSD/FARA Registration Unit 11/16/2017 2:04:59 PM - ' Received by NSD/F ARA Registration Unit 11/16/2017 2:04:59 PM I ACADEMIC PAPER SERIES social and environmental matters by adopting sustainability environmental resources, and by the ability of the ecosphere policies. Over the past decade, sustainable management has to absorb negative impacts of human activities. The concept of spread quickly throughout the business community. This green sustainable development also implies essential human needs are wave can be attributed to different motives, including the basic and thus economic growth and equity to share reso.urces 2008 national green growth initiative which rendered Korea with the poor are required to sustain them. the first country to incorporate green growth in its national Following the Brundtland concept of sustainable development, development strategy. sustainability contains three principles: environmental integrity, With Korean firms increasingly interested in environmental economic prosperity, and social equity.' Related to the firm, and sustainability management, one may question their actual corporate sustainability is a business' capacity to lower or to role in protecting the environment and contributing to green remove its impact on the natural environment10, whHe satisfying growth. This study examines which sustainability practices the needs of its diverse stakeholders such as shareholders, have been adopted by Korean firms and to what extent they employees, community· gtoups, Or environmental nonprofit are sustainable. Understanding Korean firms' sustainability organizations, etc." A company's sustainability needs to be management practices can also help gauge the effectiveness understood within a broad context of an economy's sustainability, of the government's emphasis on green growth sustainability. because corporate sustainability is influenced by institutional This has implications beyond Korea as Korean firms' voluntary boundaries and it can play a critical role in a society moving sustainability practices serve as an exemplar to policymakers towards a green economy. 12 and business managers in developing nation·s.S-This study utilizes Assessing a company's sustainability is a daunting task. As the Hart and Milstein sustainability assessment framework, sustainability claims and actions have grown, many sustainability which divides sustainability practices into four categories: assessment frameworks and indexes have sprung up to evaluate pollution prevention, product stewardship, clean technology, a company's sustainability performance. A good sustainability and sustainable vision.' In exploring large Korean firms' ,activities measurement tool needs to examine -three core elements: within this framework, this study documents Korean firms' major economics, and environmental and so.cial impacts, The Hart and sustainability practices and their positive role in advancing the Mi_lstein framework exam_ine_s·t_hese core elements, investigating green economy. the strategic approaches firms take for their competitive Corporate Sustainability Strategy and Practices advantage an.d developing four categories of a firm's sustainability In recent years, sustainability has become a.n "emerging practices: pollution prevention, product stewardship, clean megatrend" in the business community. It reflects the. growing technology, and sustainability vision. For the four typologies, awareness of resource scarcity and social concerns, both of they differentiated a firm's or.ientation to investments in existing which can alt_er the nature of the competitive environment. 7 versus nf?w market economy and choices for eng,1ging with There are increasingly more firms planning, adopting goals, internal versus external stakeholders (Table 1). r implementing initiatives, and transforming processes that can Pollution prevention is the reduction of waste and emissions promote sustainability. from current ope.rations, as less waste would mean the better Sustainable development has been defined in many ways, but utilization of resources and result in lower costs for raw materials the most frequently quoted definition is from Our Common and waste disposal. In pursuit of pollution prevention, firms focus Future', also k.nown as t.he Bru.ndtland Report ..The report on their internal operations. Product stewardship aims to modify defines sustai.nable development a_s development t.hat meets existing produtts or se.rvices to incorporate environmental the needs of the present without compromising the ability of considerations, It extends beyond organizational boundaries to futurJ! generations to meet their own needs. Although this brief include the product life cycle, from raw material acces.s through definition does. not explicitly mention the environment, the use production processes, to product use and disposal of spent of this definition has led many to see sustainable development products." Cleon technology refers to innovations that leapfrog as having a major focus on limitations, imposed by the present standard routines and knowledge to develop break-through state of technology and social organization on the utilization of technologies reducing environmental impacts. Today's firms
KOREAN f I l~MS Sv·, IAINAbl u I y l'llA( I !Cb AND THEIR Ron IN ! HE GREEN EO.JNOM'r ------
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------·- -- -- I ACAD EM rc PAPER SERI ES strive to reposition their internal competencie·s for sustainable, Higher-order sustainability activities are significantly different disruptive technologies such as genomics and biomimicry. from lower-order sustainability activities. Fundamental shifts Sustainable vision underpins a firm's focus on benefitting of business models or corporate vision should be in place communities, to include creating a roadmap for addressing within firms that strive to undertake higher-order sustainability a growing population, poverty, and inequity associated practices. Firms would require valuable, rare, imperfectly with globalization. imitable, and non-substitutable resources such as competitive imagination to undertake higher-order actions. Firms also need In using each of the four quadrants, firms can determine if high-upfront capital and the returns from which will be reaped and how they should embed sustainability into their business over the long term. Through unique resources, substantial strategy. They can also use the framework to identify whether investments, and the realignment of technical competencies, the.re is an i_mb_alance in thei_r portfolio of activities a_nd develop firms can develop new processes, products, and technologies a set of activities designed to enhance sustainability in a more complete and holistic way. Doing so would allow firms to frame _ that address sustainability challenges. Yet, studies show not many firms can invest in innovative clean technologies to upend sustainability as a multidime_nsiona_l busi_ness opportunity, rather industrial routines and knowledge.15 t_han a one-dimensional· riUisantfi;!, and invest t_heir resources to create shareholder value while responding to environmental and Higher-order sustainability activities are also seen in firms sustainatiility challenges. embracing a broader sust_ainable vision. This i_s evidenc_ed by a desire to satisfy the unmet needs of those at the bottom of the In consideration of a firm's day-to-day management decisions, economy pyramid (e.g., shantytown dwellers, the rural poor in Kurapatskie and Darnall reorganize the Hart and Milstein's four strategies and suggest lower-order versus higher-order developing countries}, considering business opportunities, and solving for socia_l and environmental problems." In partnering sustainability practices. Lower-order sustainability activities with local stakeholders, firms can develop environmental focus on improving the sustainability of companies' existing goods and services such as sani\ary products, clean water products and processes, which includes pollution prevention and infrastructure, sewage treatment systems, and innovations that product stewardship. Pollution prevention involves the reduction can. grow· crops on abandoned land and expand renewa_ble or elimination of pollution at the source instead of controlling based energy production. In doing so, firms create a pathway pollution' at the end of the pipe or stack. Pollution prevention for future growth in previously unserved markets t_hat are occurs when firms take an initial step to consider and undertake commonly overlooked or ignored by firms. To tap into such sustainability activities. Firms favor s_ome simple housekeeping markets, firms need to radically change organizational priorities, measures such as resource and energy efficiency improvement technology development, resource allocation, and. business projects that can enhance environmentally friendly corporate model design, all of which hinder firms from undertaking higher image, while creating cost savings faster than other types of order sustainability activities. sustainability activity." For these reasons, more firms may favor the implementation Whereas pollution prevention focuses on internal operations, of lower-order sustainabi_lity activities, yet companies that product stewardship involves integrating the voice of the develop higher-order sustainability activities reap greater stakeholder into business processes through extensive interaction financial benefits and improve the natural environment to a with external parties such as suppliers, customers, regulators, greater degree." Table 1 incorporates the Hart and Milstein communities, non-governmental organizations, and the media sustainability assessment framework as well as Kurapatskie and to improve environmental performance through existing Darnall's reclassification of sustainability strategies. innovations. By constructively engaging with stakeholders, firms can catalyze a change in sustainable practices within t~e business system at large. However, product stewardship is still centered on improving existing products and services that are lower-order sustainability activities. Product greening is immediate, and firms can realize the value quickly in the form of improved brand reputation and community relations.
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I I ACADEMIC PAPER SERIES Table 1. Categorization of Corporate Sustainability Strategy 18 .. - . .. - . ·- - Orientation of Extent of Focus on Market Sustainability Strate.. Stakeholder. Goal Related Notions ~~in-"~.l.~ Ecp_nomy . ~~eme~ - - .. - ... ----· - • ~reeni_ng-~nyironmentat Mar:iagern_~_nt 1\.:1.in_imize waste • LSb 14001 Polluth;,n Preventtqn- Exi~g 1.nt~rnal · .in~. ~missjons tn;ii:n • Re~u.rce _Productivity opera_tions • Ec~efficiency LOwer-order • ~isk Mc'!nagement Sustalna_bi_ii_ty • Lif~Cycle Management Integrate stakeholder •·~es_ig_n,for Environment (OfE) Product Stewa~Sttll:) . Existing External views int6 bllsiness •--t;;reen Design proces.s:es • Full CQst AcCOUnting I • Take,.BaCk . --·-··· • Eco-effectiveness Oe'velcip the sustainable • Biomimicry aean Technology New Internal Competencies of th~ ~ Leapfrog Technology Higher-order future • Sustainable Technology SustalMbility • Systems Thinking . Sustalrtable V-15IQn·(with Crea~e a Shared roadmap • ease of.the Pyramid New Externa·1 a Community Fo_c:uS) · .. for meeting unmet n~eds • liltluSlve. cap~alism
Corporate Sustainability and Green Growth and Hyundai Motor Company have adopted EMS under Policy in Korea government initiatives for cleaner production and eco-friendly The economic progress of South Korea is quite noteworthy. During manufacturing." Since 2006, the number of Korean firms the last sixty years, South Korea has successfully transformed itself publishing CSR reports has rapidly increased." In a recent survey from one of the poorest countries in the world (with only $62 per of the Korean Business Institute of Sustainable Development capita income in 1960s) to one of the most industrialized. Driven (BISD); around 99% oflarge companies that published CSR reports by highly accelerated export-fueled economic growth, South stated they used Global Reporting Initiative (GRI) guidelines, one Korea's GDP is currently ranked eleventh in the world." However, of the global standardized sustainability reporting frameworks. rapid industrialization, _urbanization, and the exponential rise in Korean firms have also been more. responsive to shareholders' living standards underlying this dramatic economic growth has demands for information disclosure. As an example, CDP" severely degraded the environment. This led to the Ministry annually requests disclosure of carbon managementinformation of the Environment promulgating several environmental laws from the largest corporations in the world to help them ensure in the 1990s that raised environmental standards to address an effective c_arbon emission reductions strategy is integral to industrial pollution.'° As a result, overall environmental quality their business. Out of the 200 largest Korean firms, 78 responded has improved. However, there is still room for improvement, to the CDP in 2016. In 2008, only 16 firms responded to CDP's particularly in loc_al air quality and habitat conservation, which request for carbon management iriformation-disc_los·ure. 25 seem to be contributing t_o the country's relatively low overall The growing interest and commitment to corporate sustainability environmental quality ranking in the Environmental Performance among Korean firms may be in large part due to a national Index. Th.is index ranks cou_ntries' performance on high-priority policy initiative to promote green growth, acknowledging that environmental issues in the protection of both huma.n health green and growth can go hand-in-hand." In 2008, President Lee and ecosystems." Myung-bak announced a "Low Carbon Green Growth" strategy Corporate Social Responsibility (CSR) and corporate sustainability as a vision to lead the country's development over the next 60 have becpme popular within the past ten years. Since 2002, large years. This made Korea the first country to adopt green growth Korean companies such as Samsung Electronics, LG Chemical, as a national developmental policy framework. A~ the tenth
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. . I ACADEMIC PAPER SERIES largest energy consumer in the world, Korea's energy intensity materials, chemicals, heavy machinery, construction, and in 2008 was a quarter above the OECD average and the nation's consumer products. In addition to their sustainability reports, greenhouse gas (GHG) emissions almost doubled between 1990 the sample firms' responses to CDP and web-based information and 2005. 27 Under the national green growth initiative, the were also referenced to gauge their overall commitments towards Korean government planned to become a leader in the emerging sustainability. Firms that report a relatively small number of global market for clean energy technologies and environmentally sustainability activities tended not to respond to the CDP or had friendly products and services." limited internet-based sustainability information.
To facilitate the fulfillment of the green growth strategy, the The total number of sustainability activities among the sample Korean government introduced a Five-Year Action Plan from firms was 515. All firms reported pollution prevention practices 2009 to 2013 and the second five-year plan from 2014 to 2018. and around 39 percent of all activities were classified as pollution The goal of the plan was to be the seventh leading "green power prevention, accounting for the biggest share of sustainability country" as of 2020, and to be fifth by 2050, based on the activities. Product stewardship was also widely adopted by following three strategies: sample firms, comprising 32 percent of activities. Only around 17 • Strategy 1: climate change mitigation and energy percent of all activities were related to sustainability vision, with independence, including effective reduction of GHG community focus and clean technology being the least adopted, emissions; 12 percent ofall activities (Figure 1). • Strategy 2: creation of,,new green power" through 32 green technology development and promotion of green · Figure 1_. Kore:a_n Firms' Su~a_inable Actjvities industries; and Sustainable Activities by Categories • Strategy 3: quality-of-life improvement and upgrading 112 9 Commun:~~;~~ __ ,.,-c- national status through construction of "green territory. - ___/ ____
To facilitate its realization, a Presidential Commission on Green Pollution Prevention 1 167 (39%) Growth was established in 2009 and a Framework Act on Low c1e·an-Technology / · Carbon Green Growth was enacted in 2010. The first Five-Year Plan 64(1Z%) ·1 l · -" , .- provides a blueprint for government actions for implementation \.)·• .'. of the strategies identified, containing specific budget earmarks and detailed tasks for ministries and local governing entities. Product Stewardship - These strategies are intended to mobilize substantial investments 199 (32%) . from the private and public sectors for renewable energy and other clean tethnologies, While prompting bu_sinesses to consider lowering their environmental impacts, adopting GHG With respect to lower-order and higher-order sustainability reduction measures, implementing climate mitigation projects, activities, around 71 percent of all sustainability activities in and undertaking a wide array of different sustainability activities. the sample are lower-order activities that prevent pollution or Under the plan, the government particularly planned to spend modify existing processes and products. By contrast, 29 percent about 2 percent of annual GDP on green growth pr~grams and of activities reported relate to higher-order activities that develop projects (around 23 billion USD). new products and technologies orthat satisfy the unmet needs Sustainability Activities Assessment of the underprivileged in developing nations." To analyze the status of sustainability among large Korean firms, There are three features of these Korean firms' lower-order this study relies on CSR reports published in 2015 and 2016 that sust_ainability activities. First, most firms with manufacturing document their sustainability activities. Thirty large companies" facilities have invested in regularly monitoring equipment were randomly chosen from Korean firms with the largest market and devices that can help firms prepare for the accidenta_l capitalization. their industrial sectors cover utilities, industrial leakage of pollutants. In reliance on EMS, some firms have also
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1/ - ACADEMIC PAPER SERI ES _,___tKl§:1 LPEAEC~rmMl'°J ~r,·u,E ------.~-- ~------~------KOREAN fl RMS 'SUS J ,\JN •\BILI I Y PlZAC 1 lCES ANU r11EJ R RULE IN 1 HE CREEN ECUNOM) Received by_NSD/FARA Registration Unit 11/16/2017 2:04:59 PM Received by NSD/F ARA Registration Unit 11/16/2017 2:04:59 PM I ACADEMIC PAPER SERIES government to send a strong policy signal about its prolonged commitment to renewable energies and climate technologies commitment towards green growth to the business community. primarily targeted two prominent environmental concerns in Korea, deteriorating -air quality and the safety of nuclear power Unfortunately, President Lee Myung-bak's national green in the wake of several scandals over the last several years." growth strategy has seemingly been disregarded by subsequent administrations. While the green growth initiative has led Korea As president, Moon's fulfillment of his campaign agenda on to be at the forefront of reducing global dependence on fossil re_newable energy expansion has the potential to lead to an fuels and has contributed t_o the greening of other ec911omies, economic system that fosters clean technology i_nnovation and the initiative's goals were largely neglected under President dedication to global sustainability leadership, particularly in Park Geun-hye, who appeared to deliberately shun the policies carbon reduction. For instance, a government push for electric of her predecessor and political rival. After her inauguration in vehicles, including adding charging st_ati6ns around the country, 2013, President Park promoted the "creative economy," eliciting will promote the rapid development of the Korean electric creative innovations from start-ups to support Korea's future vehicle industry, incentivizing companies like LG to produce growth." Since the policy agenda recognizes the importance of electric car batterie_s and become global leaders. However, the innovation, government inve·strilent ii'l clean technologies and an Moon administration's renewable energy promotion policies ensuing focus on green growth should have been highly relevant may face problems down the road, as evidenced by a recent to realizing the goals of the creative economy agenda. However, citizen panel's recommendation for reversing the governmental no tangible links between the two political agendas were maqe decision to stall the country's nuclear power program.44 To better during the Park administration. achieve his goals, there are two specific policy prescriptions This may also explain why Korean firms' dedication tosustainability that Moon. should strongly consider to promote sustainable, green growth. management has recently wavered. According to a recent study conducted by lnno Global Institute, only 58 firms among the 100 First, a broader sustainability framework in line with Korea's largest Korean firms published sustainability reports in 2016. national green growth strategy should be more explicitly Some firms e)len attempted to reduce information disclosure embraced by President ~oon and national policymakers. due to high costs and lack of lop-level managerial support for Although the Moon administration emphasizes sustainability sustainability reports and publications." This implies that many toward climate resilience and energy security, the lack of Korean firms lack understanding of sustainability as a vision detailed implementation plans for lofty policy goals such as and fail to develop business models that strategically adopt 20 percent renewable energy-based electricity production by sustainability. Many multinational firms that showed global 2030'15 raises cQncerns over policy feasibility. In this regard, the sustainability leadership, however, have set sustainability as the administration should look to the three strategies of the original company's long-term vision and have persistently undertaken national green growth initiative: 1) climate mitigation and energy initiatives that can lead to a:ame-changing innovations such a_s independence, 2) creation of "new growth engines" through GE's Ecoimagination, adopted in 2006 despite environmental green technology development, and 3) improvement of quality sustainability being a low priority for t_he Bush ad_nii_nistration. of life and strengthening the statu_s of the country. While Korea should now avoid mis-conceptualized, large engineering project During the 2017 presidential_ campaign, current South Korean dominant green growth strategies initially proposed under the president Moon Jae-in pledged to reduce the use of coal green growth initiative, it is critical for the administration to and nuclear power by replacing them with natural gas and compatibly espouse a policy agenda to boost green industrie~ renewables such as solar and wind power. 42 His aim was to raise and living conditions in tandem with climate mitigation and the proportion of electricity generated from renewable energy energy independence. As the second five-year plan for national from 1.1 percent to 20 percent by 2030-nearly double the target green growth initiative will come to an end in 2018, the third five of 11. 7 percent proposed by the previous government. He also year plan could include more modest, realistic policy targets and promised the complete phase-out of diesel cars and traditional means that can recapitulate the nation's earlier commitment to ga_soline-fueled vehicles in favor of electric vehicles by 2030- green, inclusive growth. the current market share of electric vehicles is 0.2 percent. His ~ - - ' - - - K~HU'.t\N FIR,'•i\S SU-'i 1 \lNAl\1111 ~ ['RM 11( I'): AND I Hl:lf/.. ROLi: IN I HI l1RI ! N Eco:,,..:()\\) ' 7 ------Received by NSD/FARA Registration Unit 11/16/2017 2:04:59 PM Received by NSD/F ARA Registration Unit 11/16/2017 2:04:59 PM I • • I • • • Secondly, the South Korean government should devise policy green technologies and renewable energies as well as inclusive instruments that can encourage large firms to be more devoted io economic activities for the underprivileged would be critical in higher-order sustainability strategies. The original green growth making them global sustainability leaders. In this way, policy plan included public R&D increases in energy and low-carbon makers in less-developed nations would believe that there technologies that could draw matching private investment. In . are practices that would allow them to develop in a way that particular, the government identified 27 core green technologies, is not environmentally destructive and improves resiliency in ranging from energy-efficient technologies such as high-efficiency communities that need green growth the most. light,emitting diodes to inno.vative technologies in energy Conclusion storage, smart grid systems, advanced water management, and There is widespread consen.sus that sustainable development green buildings. The government also promised investment in can be achieved by private and public partnerships, and the role · green technology R&D to reach 25 percent of all R&D by 2020.'° of c_or·porate Sl,IStaina_b_ility ha_s_ received far more attention from In 2015, R&D investment to core green technologies was 2.4 variou_s stakeholders .. Taking more responsibility for social a.nd trillion KRW, a 1.4 trillion KRW increase from 2009. However, environmental issues beyond legal mandates, many companies total expenditures for core technologies is currently about 12.6 have voluntarily started practices to protect the environment and percent of the total R&D investment, half of the 2020 target." improve soc.ial inequity, filling gaps in governance or regulatory Furthermore, large companies' green R&D investments from vacuums in areas Where reg·ulations have not bee_n in place or 2012 to 2015 have plummeted from 0.5 trillion KRW to 0.32 fully developed. The CSR movement and green wave of corporate trillion KRW. These facets may explain why industrial growth sustainability have been well established in industrialized based on key green technologies has not yet been realized nations since the mid-1980s, and a growing number of Korean in So.uth Korea. As such, expanding public R&D expenditures firms-mostly large publicly traded companies-have embraced on green technologies, particularly for commercialization sustainability as one of thei.r organizational m.issions •Over the and industrialization of technologies, should be pursued. By past decade. increasing public expenditures on green technologies across all stages of innovative technology development, the government However, the sustainability activities of Korean firms are mainly can better incentivize large companies to commit themselves to focused on lower-order activities, preventing pollution and higher-order sustainability practices that can contribute to the improving environmental performance of existing processes country's leading role in global green growth. and products. The expansion of pollution prevention and product stewardship activities is promising, indicating Korea trar,sitic;med from an impoverished, war-torn cou·ntry enhanced awareness of contingent-based costs stemming to one of the World's largest economies in less than 50 years, from environmental risks and accidents. Although lower-order serving as a model for economic development. The country's sustainability activ_i_ti_e_s, pollution prevention and product aggressive export policy has been a main contributing factor stewardship activ.itie.s should be continually fostered and scaled of its dominance in automobile manufacturing, ship-building, up among large South Korean firms, as they can be emulated and electronics industries, and many developing nations look by medium- and small-sized Korean firms considering adopting to emulate Korea's success. Likewise, Korea's green growth s·ustainability practices. In sum, Korea's continued commitment strategy that underpins the divesture of fossil-fuel based energy to green growth and Korean firms' reaction to a policy focusing infrastructure and the. creatio.n of a circular economy with green on higher-order sustainability practices is more promising forthe consumption and lifestyle can also be a model for sustainable achievement of global sustainability. development. Korean firms' more aggressive investments in KOIUt\N !-'l~\1S SUSla\lNi\l\lLI IY Plv\CllCJS 1\NU] t-HIR Rnt E Ir--; TH~ GllE~N LCONOM'r 8 -~ -- -- -~------Received by NSD/FARA Registration Unit 11/16/2017 2:04:59 PM Received by NSD/F ARA Registration Unit 11/16/2017 2:04:59 PM ------=- ACAD EM IC PAPER SERIES ;?VK8:I ' I O'l(AU::r,w:n,IC I JSTlT_l[: I Fl' ER i Nicole Darnall and Danie! Edward_sJr., "Pre_dicting the Cost of Environment Management Systems Adoption: The Role of Capabilities, Resources and Ownership Structure," 1 Strategic Management Journal, Vol. 27, lsSue 4 (2006), 301-320. - ' For Korean green growth policy, see Ran·da_ll Jon:es and Byungse:o Yoo, uKorea's Green Growth Strategy·: Mitigating Cl_imate Change an:d Developing New Growth Engines," OECD Economics Department Working Papers, No. 798 {OECD Publishing, 2010 Paris.) s Ibid. 'Stuart L. Hart and Mark B. Milste_i_n, "Creati_ng sustainable value," Academy Managemen_t Executive, Vol. 17, Issue 2 {2003), 56-69. 1 David A. Lubin and Daniel C-. Esty, "The Sustainability Imperative," Harvard Business Review, Vol. 88, Issue S (2010), 42-73. a Our Common Future, World Commission on Environment and Development (WCED), United Nations Environmental Programme, (O_xford, UK: Oxford Univers_ity Press, 1987.) 9 Matthew P.H. Taylor, Darre,11 Brown, David E. Ervin, Jim Thayer, and Brett Cas_sidy, "A Genuine Metric for Assessing Business-~ustaina_bilit'(," Building a Green Economy:, Perspectives from Ecological Econ·omics, Robe·rt B. Richardson (Ed), (Eas(Lancing, Ml: Michigan State University Press, 2013.) 10 Stuart l. Hart, "A Natu_ral-Resource-Base_d Views of the Firm," Academy of Management Review, Vol_. 20, No. 4 (1995), 986-1_014. 11 Magali Delmas and Mich_ael Toffel, "Stakeholders and environmental management practices: An institutional Framework," Busines_s Strategy and the Environment'., Vol. 13 (2004), 209-222. ii Pratima Bansal, "The corporat_e challenges of sustainable development," Academy of Management Executive, Vo_l. 1_6, No. 2 (2002}, 122-~31. u See, for example, Ulrich Steger, "Managerial Issues in Closing the Lo_op," Business Strategy and the Environment, Vol. 5, No. 4 (1996), 252-268. 1• Jean Kabongo and Olivier Boiral, "Creating value with wastes: a model and typology of sustainability within firms," Business Strategy and the Environment, Vol. 20, No. 7 (2011), 441-455. 15 Stuart L. Hart, "Innovation, Creative Destruction and Sustainability," Research-Technology Management, Vol. 48, No. 5 (2005), 21-27. 16 Stuart L. Hart and Sanjay Sharma, "Engaging Fringe Stakeholders for Competitive Imagination," The Academy of Management Executive, Vol. 18 (2004), 7-18. i1 Brent Kurapatskie and Nicole Darnall, "Which corporate sustain.ability activities are a·ssociated with g·reater financial payoffs?" Business Strategy and the Environment, Vol. 22 (2013), 49-61. . 18 The table has been adapted from Hart and Milstein's sustainable value framework. For information, please refer to Stuart-and Milstein, 2003. 1 ' "So·uth Korea ranks 11th Worldwide in GDP.Wo"rld Bank Data," Yonhap NeWs, August 16, 2016, htt'p'://e'n·glish.yonhapneWs.cO.kr/business/2016/08/16/21/0503000000AEN 20160816001700320F.html. 20 To address industrial pollution, the Environmental Conservation Law was adopted in 1977 and an environmental department (the Kcirean Environmental Protection Agency, former Minist_ry of Enyironment) was founded in 1980s.. For more see YIWW·m.e.go_.kr. 11 South Korea was ranked 80th in overall environmen-tal performance, according to the 2016 Environmental Performance Index issued by the Yale Center for Environmental La"w and Policy, Yale Data-Drilien Erivironmental Solutions Group, and the Center"for lnte·rnational Earth Science lnformatio'n Network at Co!u·mbia University. The report is , available at http://epi.yale.edu/. i 2 Ki-Hoon lee, "Motivations; Barriers, and Incentives for Adopting Environmental Management (Cost) Accounting and Related Guidelines: A Study of the Republic of Korea," Corporate Soci_a.f R_espo_nsibi.fity an_d Environ.mental Ma_r:,agement, Vol. 18, No. 1 (2010), 39-49. 23 "'Unlocking Investment Potential: ESG Disclosure in Korean Companies." Emerging Market Disclosure Project, (April, 2010), http://www.eiris.org/files/research'%20 publications/emdpkoreanreportapril2010.pdf. i4 CDP (formerly the "Carbon Disclosure Project") is an organization based in thE! United Kingdom which works with a group of investors to encourage companies to disclose greenhou·se ga:s (GHG) emis:Sions a_n_d their carbon management practices. For more see: cdp.net. is CDP Korea Climate Change Report_2016, https://b8f6Scb373b1b7b15feb-e7bd8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/ docu ments/000/001/3S0/original/CDP_ 2016_Korea_ Climate~Change_ Report.pdf?1480328290 n For more inform_atio_n o.n green gro~h, refer to the OECD web_sit_e, http://www.oecd.o'fg/greengrowt.h/. 21 Jones and Yoo, 2011. 21 Ekaterina ZalenOvskaya, "Green GrOwth Policy iii Korea: A case study," International Center for Climate Governance, (2012), http://WWW.ii::cg'.ov.org/wpc0ntent/ uploads/2015/05/08_refl~ctio_njune_2012.pdf · li John Alwyn Matthews, "Green Growth Strategies:·Kore~n Initiatives," Fut_ures, Vol. 44, No. 8 (October 2012), 761-769. io The companies analyzed include Amore Pacific, Asian Airlines, Daewoo E&C, Doosan Group, Hankook Tire, Hansel Textile, Hanhwa Chemical, Hyundai Construction, Hyundai E&C, Hyundai Motor company, K□-rean Air, KCC, Hyundai Heavy Industry, Hyundai Mobis, Hyundai Steel, Korea District Heating Corporation, KT Corporation, LG Electronics, LG c_are,.LG Chemi$1:_ry, LG Display, LG·tn_notek, LG Hausys, Lotte C_hemicJ3I, LS indust_rlal, Orion, POSCO E&C, Samsung Electronics, Samsung C&T, Samsung Engineering, and S-Oil. 11 Sustainability reports of the.sample fir-ms indude their sustain.ability activities in the entirety of their operations and the data Was used to discern higher-order su_st_ainability a_ctivlties for underserved markets in emerging economies. ------K6R~AN Fl_RMS susfAINABlt.:ITY PRAC I JCI s AND I IHI R ROL f JN I HF GRI l'N ECONOMY Received by NSD/FARA Registration Unit 11/16/2017 2:04:59 PM Received by NSD/FARA Registration Unit 11/16/2017 2:04:59 PM ACADEMIC PAPER SERIES ,WK!a:I ,u~EA ECO'JOf IC 1«s-m,1 E I r;c';. ~/i:l(.~l~"l~"I'!,'- n The table has been adapted from Hart and Milstein's sustainable value framework. For more information, please refer to Hart and Milstein, 2003. 11 .See pages 50-51 in POSTCO E&C Sustainability Report (2016): http://www.poscoenc.com/eng/sustainability/sustainability_report.a:p- :w See page 32 of the LG Hausys S_ustainabil_ity Report (2016), http://www.lghausys.com/company/sustai_n·a_bility.jsp?gUbu"n=4. 1s Presently s·2s Kore_an companies participate in t_he Korean Emissions Trading System. The government assigns the legal limit on GH,G e_mi_ssions to comp_anies and allows them to trade surpluses or shortages. 15 See pa·ges 61-62 of the Asiana Airlines Sustainability R_e·po_rt 2015, https_://us.flyasiana.com/C/pdf/Sustainability_2015_eng.pdf. 37 UN General Assembly, 2015. Transforming our world: The 2030 Agenda.for Sustainable Development, http://www.un.org/ga/se_arch/view_doc.asp?symbot:;:-A,/ RES/70/l&Lang:E. 38 See LG Electro·n_ics S_ustainability Report {2016), http://WWW.lg.com/global/sustainability/communications/sustainability-reports. 19 Matt.hews, 2012 . ..,, 40 See OECD {2015), Korea Policy Priorities for a Dynamic, Inclusive, and Creative Economy, https://www.oecd.org/korea/korea-policy-priorities-for-a-dynamic-inclusive-and crea_tive-economy-E_N_.pdf. 41 Jung Yu-jin, '-'Companies Unwilling to Reveal CSR Information in Su_st_ainability Report_s," Chosun Daily Ne\!'IIS, February 28, 2017, htt.p_://news_.chosun.com/si_t!=!/data/ htrii I_di r /2017 /02/2 7/2017022701654.html. 42 Ti_m Buckley, "IEEFA Asia_: Moon Jae-In's Ascension in Seoul is Another Blow to Asia's Coal Industry," Institute for Energy Economics and Financial Analysis, May 10, 2017, http://ieefa.org/ieefa-asia-moon-jae-ins-ascension-seoul-another-blow-asias-coal-industry/. 43 .Shim Woo-liyun, "Moon Jae-in to Push for Renewable Energy Policies," The Korea Herald, May 10, 2017, http://www.koreaherald.co1'T1/view.php?ud=20170510000794. 44 Rod Adams, "South Korean Citizen Paitel Suppo:rts Nuclear Plant Construction," Forbes, Octo_ber 20, 2017, https://www.f□-rbes.com/s_ite:s/rodadams/2017/10/20/so_uth- korean-citizen-panel-supports-nuclear-plant-construction-rejects-m-□ on-jae-ins-plan-to-stop/#4f3b30Da4d23. 45 Shim,.2017. 46 Fo_r data, refJr to Green Platform of Green Techn_ology Center, http://WWW.greenplatform.re.kr/frt/greensys/status/inve·stm_ent.da 47 Green Platform of Green Technology Ce_nt_er, for more see: http://www.gtck.re.kr/frt/en/main.do. 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